Michigan Economic Development Corporation

(Now Part of The Department of Labor and Economic Growth)

Published on May 4, 2004

The Michigan Economic Development Corporation (MEDC) is a
quasi-public agency of the state. For budgeting purposes, the MEDC is not
officially recognized as a state agency. The Strategic Fund, which was created
in the 1980s, is the recipient of state and other funds that are used to operate
the MEDC. The MEDC was created in 1999 and took over a portion of duties once
held by the Michigan Jobs Commission (MJC). The MJC was a department designed
to house all of the state’s disparate "economic development" programs in one
single unit. An executive order split the MJC in 1999 in favor of two newly
created departments, known as the Michigan Department of Career Development and
the MEDC.

The MEDC oversees work designed to "retain and expand jobs
through business retention visitation programs."
[1] The 231-employee MEDC is
Michigan’s chief dispenser of corporate welfare.

The MEDC is arguably the least necessary entity in state
government. Its existence is based on several flawed premises and political
considerations, such as:

The assumption that state bureaucrats can foster wealth
and job creation better than individual consumers, workers, bankers, insurers,
investors and managers, whose collective decisions form the market economy.

The assumption that the efforts of trade associations,
industry groups, chambers of commerce, law and accounting firms, universities
and a host of specialty consultants are insufficient to provide businesses
with the expertise they need to grow and prosper in Michigan, and that state
bureaucrats can supplement the services these organizations already provide.

The assumption that engaging in an economic "war between
the states" through selective tax credits and subsidies for large corporations
is a more effective economic development strategy than across-the-board tax
relief.

The political fear that public officials will be seen as
"doing nothing" to encourage economic development if they only remove barriers
to the efficient operation of the free-market economy and refrain from state
intervention.

The fact is that all the business support services provided
by the MEDC, if needed at all, can be, and most often are already, provided by
private-sector firms. The programs are subject to political considerations, and
there is no reason to believe that state bureaucrats can invest capital any
better than private-sector financial institutions and Michigan companies
themselves. Michigan does not need a government-directed industrial policy; it
needs leadership that understands and respects the operation of a free-market
economy.

It is therefore recommended that the MEDC be eliminated
entirely. Doing so will liberate significant state resources to be returned to
Michigan citizens and businesses. State legislators also should change the law
to ensure that all Strategic Fund revenues generated through Indian Gaming
Compacts be redirected to the General Fund. Doing so will raise approximately
$11.5 million annually for state coffers.
[2]Author’s Note:In 2002
Compact revenues exceeded $13 million. The Mackinac Center will use this
updated figure to calculate the total recommended savings for the 2nd
edition of the Center budget study.